TMI Blog2022 (8) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] and PCIT vs. IL FS Energy Development Company Ltd.[ 2017 (8) TMI 732 - DELHI HIGH COURT] the disallowance to be made under Section 14A cannot be in excess of the exempt income earned by the assessee. The counsel for the revenue has placed reliance on the CBDT circular 5/2014 to contend that disallowance u/s 14A would be attracted even if corresponding exempt income is not earned during the financial year. The said circular cannot be relied upon since its contrary to the law laid down by this Court. There is no challenge to the finding of the CIT (A) and the ITAT that AO failed to record satisfaction before invoking the provisions of Section 14A which is the condition precedent for making the addition. In this view of the matter the additional disallowance made by the AO is impermissible and contrary to law. ITAT was correct in upholding the order of the CIT(A) deleting the disallowance. Disallowance u/s 36(1)(va) on account of late deposit of employee's contribution to PF - Scope of amendment - HELD THAT:- Memorandum acknowledges that courts have taken a view that the 'due date' to be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) for the relevant AY 2012-13 on 29th September, 2012 declaring an income of Rs.25,54,27,410/-. 4. The ITR of the assessee was selected for scrutiny under CASS. Accordingly, a notice under Section 143 (2) of the Income Tax Act, 1961 ( the Act ) was issued on 16th August, 2013. Further, a notice under Section 142 (1) of the Act along with a questionnaire was issued on 16th April, 2014 and 7th November, 2014 and served upon the assessee to furnish the requisite details. The assessee complied with the aforesaid notice and furnished the requisite details and placed on record the documents sought by the Assessing Officer ( AO ). 5. Vide the assessment order dated 16th March, 2015, the AO made additions to the extent of Rs.5,45,40,731/- and thus, determined the total income of the assessee at Rs.30,99,68,140/-. The break-up of the disallowances, leading to the additions as, made by the AO is as under :- Income as per return filed 25,54,27,410 Add :- 1. Interest paid to Prasar Bharti 1,03,15,922 2. Consumption Debtors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s own case for AYs 2008-09 and 20092010 has upheld the assessee's claim for the said expenses of 'consumption debtors'. The ITAT thus, held that since the assessee has been consistently following the mercantile system of accounting, liability brought on record is an ascertained liability. It also held that the party-wise detail of the advertisers to whom the incentive was extended has been placed on record by the assessee and perused by the CIT (A). 12. Before us, the learned counsel for the revenue stated that the ITAT while upholding the deletion of the said disallowance erred in relying on its own order in the case of assessee for the AYs 2008-09 and 2009-10. He stated that the said orders of the ITAT are under challenge before this Court. On merits of the claim, he stated that this is merely a provision and therefore could not be allowed as an expense in the relevant assessment year. He disputed that the discount is extended to the advertisers in the same financial year. He stated that ITAT was wrong in holding that it is an ascertained liability. 13. Per contra, the learned senior counsel for assessee stated that the claim of expenses on account of 'con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent has placed before us a chart to demonstrate that the said expenditure has been claimed by the respondent in its Profit and Loss Account, since the assessment year 2004-05. Further, though scrutiny assessment was carriedout in each of the AYs, the said expense was duly allowed by the AO for the AYs 2004-05, 2005-06, 2006-07 and 2007-08. 18. The chart also shows that this expense was first disallowed by the AO in the AY 2008-09 followed by AYs 2009-10, 2010-11, 2011-12 and 2012-13. He however, submits that the disallowance made by the AO in each of the aforesaid four years has been deleted by the CIT(A) and said deletion has been upheld by the ITAT. He states that as a matter of fact the incentive has been duly passed on to the advertisers and income from billing was reduced to this extent. 19. He further submits that applying the rule of consistency, even in the year under consideration i.e. AY 2012-13, no error has been committed either by the CIT(A) or by the ITAT in accepting the expenditure and deleting the addition made by the AO. He states that in the grounds of appeal, though, it has been averred at ground (f) by the appellant that the appeal on the issue of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter- and if there was not change it was in support of the assesses-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken. 24. We therefore find no infirmity in the order passed by ITAT upholding the decision of CIT(A) deleting the disallowance on account of consumption debtors . Disallowance under Section 14A of the Act 25. During the scrutiny proceedings, the AO observed that the assessee has made investments in its subsidiary and associate company and earned exempt income of Rs. 2,34,585/- in the relevant assessment year. The assessee had made a suo moto disallowance of Rs. 29,04,491/-. However, the AO proceeded to invoke the provision of Section 14A of the Act r/w Rule 8D of the Income Tax Rules, 1962; computed a disallowance of Rs. 38, 94, 755/- and made an addition of Rs. 9,90,264/-. The CIT (A) r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined as the date of filing the return of income under Section 139 (1) of the Act. In arriving at the said finding the CIT (A) followed the judgments of this Court in CIT Vs. AIMIL Ltd. (2010) 321 ITR 508 (Delhi). 31. The ITAT in the impugned order has noted that there is no dispute that the employees contribution of PF was paid before filing the return of income and therefore held that the CIT (A) has rightly deleted the disallowance made by the AO in consonance with the law laid down. 32. Learned counsel for the revenue submits that the ITAT fell in error by placing reliance on the judgment of this court in AIMIL Ltd. (supra), wherein it was held that if the deposit of employees contribution towards provident fund is made by the assessee before the due date of filing its return, no such disallowance can be made under Section 36(1)(va) of the Act. In this regard he states that this court in AIMIL Ltd. (supra), decided the issue in favour of the assessee relying upon the judgment of the Supreme court in Commissioner of Income Tax vs. Vinay Cement Ltd. 213 ITR 268 (SC), which order of the Supreme Court relates to delay in deposit of contribution made by the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition relating to employees contribution towards the Provident Fund and the Employees State Insurance contribution made by the assessing officer under Section 36(1)(va) of the Act. The Division Bench, as is evident from the order, referred to the clause (v) of sub-section (1) of Section 36 and thereafter to clause (va) of the same and scanned the anatomy of 43B and referred to the decision in Vinay Cement Ltd. (supra) and relied on the decision in P.M. Electronics Ltd.(supra) wherein the substantial questions of law were framed, inter alia, whether the amounts paid on account of PF/ESI after due date are allowable in view of Section 43B read with Section 36(1)(va) of the Act and proceeded to hold as follows: We may only add that if the employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee becomes entitled to deduction under the provisions of Section 36(1)(va) of the Act. Section 43B(b), however, stipulates that such deduction would be permissible only on actual payment. This is the scheme of the Act for making an assessee entitled to get deduction from income insofar as employees contribution is concerned. It is in this backdrop we have to determine as to at what point of time this payment is to be actually made. 8. Upon perusal of the aforesaid, we are of the considered opinion that the decisions rendered in P.M. Electronics Ltd.(supra) and AIMIL Limited (supra) have correctly laid down the law and there is no justification or reason to differ with the same. In the result, we do not perceive any merit in this appeal and accordingly the same stands dismissed. (Emphasis supplied) 35. Learned counsel for assessee has also drawn out attention to the order dated 10th September, 2018 passed in ITA No. 983/2018 in the case of PR. Commissioner of Income Tax-7 vs. PRO Interactive Service (India) Pvt. Ltd., wherein this Court after taking note of the judgment in AIMIL Ltd.(supra) has settled this issue conclusively against the revenue held as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an application under section 154 of the Act before the Commissioner of Incometax (Appeals) for rectification of the mistake. After having satisfied that payment had, in fact, been made, the Commissioner of Income-tax (Appeals) rectified the mistake and deleted the addition by holding that the assessee had made the payment before the due date of filing of the return, which was a fact apparent from the record. It was now the turn of the Revenue to feel agitated by these orders and, therefore, the Revenue approached the Income-tax Appellate Tribunal (ITAT) challenging the orders of the Commissioner of Income-tax (Appeals). The Department has, however, remained unsuccessful as the appeal preferred by the Department is dismissed by the Income-tax Appellate Tribunal vide its impugned decision dated December 31, 2007, which is the subject-matter of appeal before us. 17. It also becomes clear that deletion of the second proviso is treated as retrospective in nature and would not apply at all. The case is to be governed with the application of the first proviso. We may only add that if the employees' contribution is not deposited by the due date prescribed under the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 'due date' for the purpose of deposit under Section 36(1)(va) of the Act is to be the 'due date' on which the employee contribution was required to be deposited under the relevant statute and the 'due date' referred to under Section 43B of the Act would have no application. Thus, the deposit made by assessee on 25.04.2012 has been correctly disallowed by the AO. 40. The said contention is noted to be rejected since it is contrary to the plain text of the Memorandum of the Finance Bill, 2021 proposing the said amendment. The relevant extract of Clauses 8 and 9 of the Memorandum of the Finance Bill 2021 explaining the proposed insertion reads as under : Though section 43B of the Act covers only employer s contribution and does not cover employee contribution, some courts have applied the provision of section 43B on employee contribution as well. There is a distinction between employer contribution and employee s contribution towards welfare fund. It may be noted that employee s contribution towards welfare funds is a mechanism to ensure the compliance by the employers of the labour welfare laws. Hence, it needs to be stressed that the employer s cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that a provision in a Tax Act which is for the removal of doubts cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. The Supreme Court further held that a cardinal principal of tax law is that for the law to be applied it has to be in force during the relevant assessment years unless otherwise provided expressly or by necessary implication. In that view it was held by the Supreme Court that the amendment was not retrospective. 43. As noted above, this court has as early as in the case of AIMIL Ltd. (supra) dated 23rd December, 2009 held that the due date for the purpose of Section 36 (1) (va) of the Act would be the due date as provided under Section 43B of the Act and not the relevant Labour statute. This law as noted above has held the field till date, followed by this Court consistently and the appellate authorities below have determined the matter in accordance with the said law. 44. Consequently, this Court is of the view that the amendment to Section 36(1)(va), which is 'for removal of doubts', cannot be presumed to be retrospective even where such language is used, if it alters or ..... 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